Rising to the challenges of retail

Rising to the challenges of retail

SandpiperCI CEO Tony O’Neill says finding staff, the town centre business plan and limited supply routes are all making retail highly challenging in Jersey, but the retail tax has been particularly damaging.

‘The retail tax is a complete and utter disaster. How on earth that ever got passed through, I cannot believe. I think it was crazy politics.

‘For us, for sure, it’s cost at least 30 jobs because there are two brands I would have brought in that I said no to because I couldn’t justify the capital investment. If someone comes along to any household and takes 20% of your money away from you that you thought you were getting, then something’s got to give. That’s cost us jobs. It’s cost the Island investment.

‘We’ve got this new retail Scrutiny committee that’s just been briefed to have a look at it again, so we’ll be making an appropriate submission there. But if that doesn’t get any better, then clearly that curtails investment and what’s fundamentally wrong about it is why is retail any different to hotels or wholesale or gambling shops, or any of those other things that don’t pay tax, or finance, which pays 10% tax?

‘How could you put 20% onto the sector which is factually under the most pressure than any element of society is at the moment? You’ve seen the high streets in the UK fall apart and suddenly somebody has just come along and said we’ll take 20% of your profits away. Not only is the whole principle ludicrous, it’s iniquitous and the timing could not have been any worse.’

Like many businesses, SandpiperCI is also finding staffing a major issue. ‘Both islands are an absolute nightmare in terms of the limited number of licences, but then the quality of the people that will apply and that’s bringing with it pressures. I have got hundreds of hours of vacancies across my retail business, hundreds in both islands, and even in some cases where we have licences we still can’t fill those roles. So it’s a problem. And inevitably it’s driving up costs because, frankly, the pool is getting smaller and smaller, so everyone is fighting over that same pool and you’re out-bid and out-bid.

‘I guess the only thing we’ve got is scale, but it’s a problem and it’s not going away and I don’t see any creative thinking as to how it’s going to get any better because we’ve got this nimbyism protectionism view of life that doesn’t appreciate that if the working population is getting smaller, then the non-working population, how are they going to be supported?

‘Those arguments are well trodden but nobody seems to pay any attention to them.’

One of Mr O’Neill’s other concerns is the security of our Island’s food supply and how we would cope if there was an emergency, especially with logistics at the ports. ‘In the morning it’s a bun fight, because everyone’s trying to get their food out and into the shops. To be fair, Ferryspeed, the handling agents, do a very good job in very difficult circumstances, but we have the ongoing issues of one boat company that has its foot on the neck of the whole Island, basically, and the supply chain for the islands is, for food, very, very fragile.’

‘So the reality is that under normal circumstances we’d last probably a week on fresh foods and three weeks on everything else, but as you know if the word goes out that the boat’s been late, people get into the shops and they strip them. So I would think that the fragility of our food chain, we would be cleaned out within a week, we’d have nothing left; and that, I think, is a major issue for the islands and again something which nobody seems to be thinking and planning for.’

It’s not just in an emergency that SandpiperCI are concerned with problems about food delivery. ‘I would say probably 30% of the time we encompass shortages on our food deliveries of one form or another. It’s not all down to the boat – it could be down to traffic congestion on the M3, which means they miss the boat, but 30% of the time our supply chain on food is getting interrupted – that’s a lot, and if that interruption gets to be an ongoing scenario, then it snowballs.

‘So I think that’s a big issue that the States need to think about.’

Despite the challenges, SandpiperCI as a business is still investing in the Island. They opened their fifth Morrisons store in St Aubin last week as all the Food Halls, including Benest, and some Iceland stores, are rebranded. ‘A lot of work going on, a lot of capital investment into the Island, because obviously we’re ripping out old fridges, replacing flooring and getting it up to the standard it needs to be, so a major project for us.’

Their strategy has been to have a good spread of food brands, from M&S to Iceland, with Morrisons now a strong mid-market option directly competing with the Co-op. They chose Morrisons above others because of their buying power and the fact they produce most of their own fresh foods, thus guaranteeing provenance and supply-chain security.

After several weeks of trading, they have been surprised by the popularity of the Morrisons shops. ‘We feel like we’ve got a tiger by the tail and, if anything, if I’m honest, at the moment we are struggling to keep up; and if you’ve been into Five Oaks on more than one occasion you may have seen that. Five Oaks is a phenomenally successful shop and we’ve knocked down car washes to create more car parking there just because it has been a nightmare, and we managed to finally get Andium Homes to release some space so we can create a warehouse off our property; but we are literally struggling to keep the shelves filled.’

SandpiperCI isn’t just a retailer, it’s now a landlord, after buying Liberty Wharf in March of this year. ‘Historically the centre has been tragically mismanaged. We’ve been operating 60% of the retail space. Without us the place wouldn’t have even ever got opened because nobody was taking it except a few local operators and basically they were grabbing at any operator they could to try and put in there; so you got fish tanks in there and all sorts of stuff. So we are doing a lot of work to clean the place up; we’re rebranding it – we’re just talking to Planning about the signage because you wouldn’t know what it is.

‘We’re rebranding it around the lines of shop, dine, eat, relax. It’s not a shopping centre; it’s not Bluewater. If you talk about a shopping centre you expect shops until they stretch out in the distance. The reality is there’s a good eclectic mix of food-eating shops in there. There’s some local operators in there who do quite a nice job and we’ve got the backbone, if you like, with the potential new brand we’re bringing in (to replace the M&S Home Store) and George. George trades amazingly well out of there.

‘So I think with our retail hat on we can make a big difference in there, but by the nature of the fact you can’t change operators and leases overnight it will take some time to work through.’

The long-term vision for Liberty Wharf is to make it similar to Covent Garden. ‘We are going to put a stage into there; we want to get performers, buskers, school choirs. We want to create a communal seating area in the centre so people can buy their food from various locations and bring it into the tables and eat.’

At the moment, Mr O’Neill says he wouldn’t currently put a retail outlet into the main town centre and says that while some local landlords are being realistic about rental prices, others are making shopping areas like wastelands because they refuse to lower their expectations. ‘You’ve got some landlords, mainly local -owned landlords, who have been sensible over the past couple of years in terms of their expectation of rent. But you’ve got a lot of properties that are more institutionally owned that are not prepared to write down the carrying-asset value of the stock, so therefore won’t touch the price of the property. So that Next unit is still on for half a million. They’re never going to get a retailer in there to pay half a million, but they’re not accepting any offers.’

Despite the difficult retail landscape, Sandpiper are investing and looking overseas for expansion. ‘I guess at the moment we are pretty content with the way things are going. The business has done well since we’ve gone into private ownership locally. We’ve bought iQ, so we’ve bought the Apple brand; we’ve bought Costcutter; we bought Liberty Wharf. We’re fairly aggressive: we’re also developing in Gibraltar and Spain. We just opened our first Hotel Chocolat in mainland Spain, so we’re looking at other markets with several of our franchise partners.’

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